Texas CFDs...why not use an AITD? - Posted by Stacy(AZ)

Posted by Bud Branstetter on August 24, 2001 at 21:53:35:

A CFD gives equitable interest while the AITD gives actual interest. Either way they can stop a foreclosure, or eviction if the contract has not been properly cancelled.

Yes the AITD or recorded CFD gives exposure but a contract for beneficial interest does not. Not an executory contract for real estate. It is for personal property. Go even farther and don’t have it as a sale-ala Pactrust.

The disadvantage of the CFD or AITD is that it becomes a sale in the eyes of the IRS. That is unless you want to follow Yieder type people and call it an uncompleted sale. By keeping it as an income property for a few years before the occupant “buys” gets you capital gains, 1031 exchange or installment sale benefits.

Texas CFDs…why not use an AITD? - Posted by Stacy(AZ)

Posted by Stacy(AZ) on August 22, 2001 at 01:55:07:

I was lurking around when Bill Bronchick warned that new Texas laws were going to make using a CDF pretty painful there. Another way to wrap a sale is using an AITD. I don’t use it when I sell, here in AZ, because the forclosure period is much longer if the seller defaults, than it is for a CFD. But I think I read that a Trust Deed foreclosure in Texas is very fast. So, why not use an AITD instead of a contract for deed when you sell?

Are the statutes pertaining to an AITD (or any deed of trust) just a hard on sellers as the new CFD laws are?

Just curious-


Faster to foreclose a CFD - Posted by William Bronchick

Posted by William Bronchick on August 22, 2001 at 10:59:24:

In TX, a CFD foreclosure becomes requires a trustee sale if the buyer has a certain amt of equity. Most CFD buyers default in the first year for non-payment. They usually just leave or can be bribed to go away. With an AITD you ALWAYS have to foreclose, even if the tenant leaves.

Re: …should be “if the BUYER defaults” - Posted by Stacy (AZ)

Posted by Stacy (AZ) on August 22, 2001 at 02:13:01:

My Bad

Re: Faster to foreclose a CFD - Posted by Stacy (AZ)

Posted by Stacy (AZ) on August 22, 2001 at 12:17:10:

Thanks, Bill. Leaving open the option of NOT having to go thru a non-judicial foreclosure sounds worthy of using a CFD versus AITD. You stated that in Texas the seller always has to go through a foreclosure with an AITD…but does Texas take away the option of a Deed in Lieu, which would circumvent the need for a foreclosure?

I do want to add, even a non-judicial foreclosure in Texas sounds relatively minor, compared to other states. I understand that it takes (minimally) 41 days from start to finish, or up to a couple of weeks longer. This is a very short period. So, if my buyer wanted an AITD instead of a CFD, I would definitely consider it if it would make the deal. I’d try to get as much money up front as possible in return for this “priviledge” since the cost of a foreclosure may be a little more, and I’d have to make up a couple of payments during the process (especially if the Deed in Lieu bribe is taken away by Texas law).

Thanks for your clarifications.


foreclosure… - Posted by David Alexander

Posted by David Alexander on August 22, 2001 at 12:15:04:

is faster in light of the new law…

I’ve decided I will probably go to straight wraps…

20 day demand and 21 day foreclosure vs. 60 days on forfieture of CFD.

David Alexander

Re: Faster to foreclose a CFD - Posted by Bud Branstetter

Posted by Bud Branstetter on August 23, 2001 at 24:16:12:


The deed in lieu is still possible on any deed. The problem is it does not extinguish any judgements or liens filed after the deed but before you deed in lieu. That is why you either do a good title check(maybe insurance) before you accept a deed in lieu.

The real problem, as I see it, is that you are putting on public notice that you have violated the DOS when you record a AITD deed. No so when using a land trust.

The other problem is that you have not only given them equitable interest but actual interest in the property. You are then susceptable to bankruptcy or other entanglements that could interrupt your cash flow and endanger your profit. Keeping them in there as a tenant while giving them ownership benefits is still the way to go. I will continue to use the Pactrust concept. My attorney is willing to defend it and so am I.

Re: Faster to foreclose a CFD - Posted by JohnBoy

Posted by JohnBoy on August 22, 2001 at 12:30:25:

(especially if the Deed in Lieu bribe is taken away by Texas law).

Stacey, Stacey, Stacey…

We don’t BRIBE people in this business. We HELP people by providing them with SOLUTIONS to where they can solve their problems after showing the light at the end of the tunnel and seeing through the errors of their ways!!! LOL

BRIBE??? Why, that sounds scandalous!!! LOL

Re: Faster to foreclose a CFD - Posted by Stacy (AZ)

Posted by Stacy (AZ) on August 23, 2001 at 16:46:47:

Thanks for the clarifications, Bud. It’s good that the deed in lieu is still available.

Regarding the rest of your post, remember, I’m discussing selling on CFD versus AITD, not buying. Therefore, the land trust keeping the DOS violation from public notice isn’t germane. I thought I saw that CFDs now must be recorded in TX, so either the AITD or CFD will expose the sale…no difference there.

We already have the property in a land trust, and now we’re selling it. CFDs were a favorite way to sell owner financed, but with the new legislation, they’ve become more cumbersome. I was asking why not use an AITD if the CFD is now not attractive.

Would a CFD sale keep a seller away from susceptibility to BK’s or other entanglements? Is that an advantage over an AITD?


Re: Oops… - Posted by Stacy (AZ)

Posted by Stacy (AZ) on August 22, 2001 at 12:37:51:

That was a mis-spelling, Johnboy. Thanks for catching it. The correct spelling is “opportunity”.